Tuesday, March 28, 2017

Oil Price Rises as the Greenback Plunges

Oil Price Rises as the Greenback Plunges

On Tuesday, oil prices went up past US Dollar decline. During the early hours of Tuesday, stock markets experienced regain following the situation. It had been in the recent talks worldwide that oil production in the U.S. is in an indeterminate state, putting uncertainty if the supply cut would be enough to cater the market.

Front-month Brent Crude Futures LCOc1 (regarded as an international standard for oil), increased by 7 cents following $51.23 per barrel by 0910 GMT on their last close. It was also known that West Texas Intermediate (WTI), which is located in the United States, crude futures CLc1 lost 48 cents at $48.21 a barrel.


Asian markets recovered after the incident, a concrete example was Japan oil stocks shooting up. Japan Petroleum added 2.2%. Other key oil stocks that benefited were Oil Search which had a 1% gain; Woodside Petroleum had increased by 1.6%, and both having 1.3% additional are the BHP Billiton and Rio Tinto.

The U.S. Dollar lost 2.9 percent in worth versus the other leading currencies. With the weak dollar, it makes oil cheaper for nations that are using different currencies. It also makes traders withdraw their money from foreign exchange markets and invest it in other commodities futures like crude or even gold. U.S. crude oil becomes attractive to other countries, thus increases in import demand. Most especially in Asia, more crude oil is expected to be transported.

Traders can also take this opportunity to their advantage and exploit arbitrage opportunities at the moment. Hence, they can send excess U.S. crude to areas with potential buyers. A veteran trader even mentioned that the market appears to be soaked in crude.


Organization of the Petroleum Exporting Countries (OPEC) and other oil producers together with Russia decided to extend the production cut through the middle of 2017 in order to sustain the market.  Indeed, uncertainty prevails the current oil market state. With that, any market enthusiast should closely watch some other factors to understand where oil prices are likely to proceed such as cuts in production, bloating inventories and escalating rig count to be able to make the most out of any circumstance. 

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